Philadelphia Becomes the First U.S. City to Ban Employers from Inquiring About Wage History

On January 23, 2017, Philadelphia Mayor Jim Kenney signed into law Bill No. 160840, which amends the Philadelphia Fair Practices Ordinance and prohibits employers from inquiring about prospective employees’ salary histories.

Following on the heels of the passage of similar legislation in Massachusetts, which became the first state to prohibit employers from requiring employees to disclose wage history as a condition of employment, Bill No. 160840 passed with unanimous approval by the Philadelphia City Council. This ordinance is the first of its kind in a United States city; however, similar legislation since has been adopted in New York City and at the state level in New Jersey, California, and Mississippi.

The amended ordinance makes it unlawful for an employer, employment agency, or an agent thereof to:

Inquire about an applicant’s wage history or require disclosure of an applicant’s wage history;

Condition employment, or consideration for employment, on disclosure of wage history;

Rely on the wage history of an applicant in determining that individuals at any stage of the employment process, unless the applicant knowingly and willingly disclosed his or her wage history to the employer; or

Retaliate against an applicant for failing to comply with an inquiry regarding wage history or opposing an employer’s alleged violation of the Ordinance.

“Employer” is broadly defined to include entities that do business in Philadelphia, and likely will apply to employers that hire employees to physically or remotely work at a location within the city. The ordinance allows for enforcement by the Philadelphia Human Relations Commission and a private cause of action, with remedies and penalties including compensatory damages, punitive damages, injunctive relief, attorney’s fees, and costs.

The objective of the ordinance is to promote wage equity by curbing discrimination in the hiring process. Specifically, the original bill cites a 2015 U.S. Census Bureau report that found that women in Pennsylvania earn 79 cents for every dollar a man makes, with women of color typically earning even less. Accordingly, the City Council found that inquiring about wage history can perpetuate that existing gap because prior wages would serve as the basis for setting the compensation for the current position. Proponents of the bill argue that the responsibilities of a position should determine the appropriate compensation-not the prior wages earned by an applicant.

The passage of the ordinance was not without controversy, and its viability has been called into question by members of the business community and the Pennsylvania Legislature. For example, Comcast threatened to sue Philadelphia for a purported violation of employers’ First Amendment rights, claiming that there is no evidence to suggest that inquiring about wage history perpetuates discrimination, and therefore Philadelphia cannot justify curtailing employers’ rights to ask.

The Philadelphia Chamber of Commerce has echoed Comcast’s concerns regarding evidentiary support, and initiated a lawsuit in Federal court, arguing that the ordinance suppresses employers’ free speech rights in violation of the First Amendment to the United States Constitution. The Chamber of Commerce of Greater Philadelphia v. City of Philadelphia and Philadelphia Commission on Human Relations, No. 17-1548 (E.D. Pa. filed April 6, 2017). The United States District Court stayed the effective date of the ordinance pending resolution of a motion for a preliminary injunction.

The ordinance faces challenges at the state level, as well. On February 8, 2017, the Pennsylvania Senate passed Senate Bill 241, which prohibits discrimination in pay based upon gender, retaliation for filing complaints about wage discrimination, and policies that prohibit employees from discussing their salaries. Interestingly, Bill No. 241 included an eleventh-hour amendment that states that any local ordinance or rule concerning the subject matter of the act-prohibiting discrimination in wage rates because of sex-will be preempted and superseded by the state law. In other words, it not only will override the Philadelphia ordinance (with no replacement) if enacted, but also will prevent any other locality from enacting similar legislation.

The ordinance was supposed to take effect on May 23, 2017, although its fate in light of the Federal court stay and current challenges is unclear. Similarly, Pittsburgh recently has enacted legislation that prohibits the city from inquiring about a candidate’s salary history or relying on salary history during the hiring process; however, this bill also is tied up in litigation. Finally, several jurisdictions, including Maryland, have been pursuing statewide legislation with the same goals. During the 2017 legislative session in Maryland, House Bill 398 was introduced. The bill prohibited employers with 15 or more employees from inquiring into a prospective employee’s prior salary history. The bill did not make it through the Senate during the 2017 legislative session, but is likely to be reintroduced in 2018.

Despite the uncertainty of some of the legislation, employers should consider modifying their application process to prevent inquiry into or consideration of wage history. This new standard of practice could spread faster than expected due to the wide number of businesses that operate both in Philadelphia and other jurisdictions. Many businesses likely will implement standard job applications and interview procedures tailored to the new ordinances and legislation, causing business branches in other areas to eliminate prior salary questioning as well. Additionally, to ensure that an employer can appropriately consider an applicant’s wage expectations (independent of history) and to protect against claims if an applicant willingly discloses wage history, it is highly recommended that employers with locations in Philadelphia provide all applicants with a written disclosure of the applicant’s rights under the Fair Practices Ordinance.

If you have any questions concerning this or other legal issues, please contact Erin R. Kawa, 717.909.1624 or ekawa@shumakerwilliams.com, at Shumaker Williams, P.C.